Some people make all the right moves when it comes to retirement planning but fail to anticipate the things that might derail their plans. It's important to save and invest, but it's also a smart idea to have your eyes wide open when it comes to things that may go wrong.
Whatever your age when you plan to stop working, it's important to be ready for these three potential retirement tripwires that could throw you off track. It's not possible to cover every contingency, but you can minimize risk and give your retirement plan its best shot at succeeding if you consider preparing for these potential problems.
A medical problem can derail your retirement savings plans. Image source: Getty Images.
1. Healthcare costs
Even when you have insurance, a serious illness or medical problem can cost you big bucks. You may have high deductibles, or require care that's not covered by your insurer.
You can plan for this by setting aside money in a Health Savings Account (HSA). You need to meet certain requirements to open an HSA, but if you qualify, you can save (and invest) money tax-deferred that can be used to pay medical bills.
Even if you don't qualify for an HSA (which could mean you have very good insurance), your retirement planning should factor in having funds to cover some level of out-of-pocket medical expenses. If those expenses never happen, then you have some extra money available for other things.
2. Your kids
Every parent wants to help their child or children if they are in need. The problem is that doing so can create financial problems for the older generation.
When you give or loan your child money, consider the impact not having that money will have on your retirement. Even if it's a loan and you expect to be paid back, do the calculations as to what happens if you are not (since you won't have the recourse most lenders have available).
It's OK -- even great -- to help if you can afford it. If you can't, be honest and help in non-financial ways that don't put your retirement at risk.
3. Job loss
You should budget for the potential of being out of work for an extended period of time. As you get older, if you lose your job it may take longer to find a new one. Plan on being out of work for at least six months every decade or so (or even more if you work in a volatile field).
Time spent without a job can impact your retirement plans in two ways. First, you have to spend your savings to live (hopefully you have a separate emergency account for this), and second, you aren't adding any new savings.
You can't plan for every problem
It's not possible to cover every scenario that could impact your retirement plans. Planning for these three, however, sets you up well to handle whatever problems come your way. And if those problems never happen, maybe you can retire early, or retire with more money put away than you had expected.
